[phpBB Debug] PHP Notice: in file /viewtopic.php on line 1002: date(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone.[phpBB Debug] PHP Notice: in file /viewtopic.php on line 1002: getdate(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone.Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - Politics, hungry lawyers and media help abuse the system

World politics are being affected by a public disgust for self-dealing and rigged systems. By a growing public awareness that many of the systems that they pay to serve them, are preying upon them instead.

Ontario is 1.5 years from it’s next election, (June, 2018) and out west, Alberta is 2.5 years away, (May, 2019). A look at the securities regulatory landscape might be in order. It could shine a light into some dark corners, some parasitic regulatory practices which seem designed to harvest your financial well being.

Positive change has occurred out west, in the last two years since the 40+ year rein of political rule ended.

It must be pointed out that Securities regulators in Ontario and Alberta earn salaries in excess of $700,000 at the top, which is more than triple what the Premier earns. Skeptics might say, as I do, that salaries at this level are not so much indicative of a fair regulator paycheque, so much as a control and compliance mechanism by the investment industry, so that the regulator might overlook the concept of strict adherence to public protective laws and rules.

Paying a couple million dollars to the top four people at either the ASC or the OSC is a bargain, in the bigger picture scheme of the ‘billions’ earned under an industry ‘compliant’ system.

The largest example of this (paid rule avoidance) was the $32 Billion dollar ABCP (sub prime mortgage ‘investments’)…..which were allowed to be dumped upon Canadian investors despite laws about bond rating requirements which would make them illegal. For the price of a small cheque to the Securities Commission, they can make that little “illegal” problem, disappear.

Making the illegal, legal, allows defective, toxic or poorly designed investment products to be dumped upon unsuspecting Canadians. Regulators grant the permission, hundreds of times each year, and at the same time will ensure that consumers are not told….yes, that is correct. You will receive more public notice if your neighbour wants to build his garage one foot closer to your fence, than if your investment dealer wants to sell you ‘factory second goods’.

Some of the more compliant regulators who sign the ‘exemption’ orders, have been rewarded with promotions and salary increases and have managed to turn what could be Canada’s largest financial robbery, into a rapid climb up the slippery regulatory career slope.

In another multi billion dollar (per year) haircut example, a SIPA report released in November, shows that regulators across Canada allow over 100,000 commission sales brokers, planners, fund and insurance sellers, to brand to themselves as “advisors” whilst not holding any such license. This too, is illegal under provincial securities acts, which speaks further to regulator compliance.

What if the public learned, that investment regulators would ignore the laws, and allow consumers to be both kept in the dark, and harmed for greater profit to the industry they regulate? (100% of government securities regulators salaries in Canada are funded by the industry they are paid to police)

In Alberta, the past nine or more finance ministers, including the new NDP finance minister, have each ignored the lack of protection of Albertans, and insisted there is absolutely nothing wrong with the system. Their letters to this effect, are nearly identical carbon copies of each others, for the past 20 years, no matter whether the political colours were blue or orange. Same letter.

The cost of one single truly profitable financial crime in Canada goes as high as $32 billion. I say profitable, since the ‘regulators’ did feel it necessary to hand out ‘fines’ amounting to one half of a penny, for each dollar taken from Canadians. They did not mention as part of their fine process, that they (the regulators, OSC etc) signed and approved the exemption orders that allowed the illegal product to be sold in Canada.

This kind of rigging of the financial game, (and the political?) and breakdown in fairness and honesty might partially explain some of the unusual, and upsetting political results we are seeing in the world today.

What will the political results by in June, 2018 in Ontario and May, 2019 in Alberta, if Canadians learn of the financial self-dealing allowed by our government regulators? Our government MPP’s and MLA’s? It is a breach of the public trust that is today hidden from public view, but cannot remain hidden forever.

1. Recently Released by SIPA is ADVISOR TITLE TRICKERY found here [url]http://sipa.ca/library/SIPAsubmissions/500%20SIPA%20REPORT%20-%20Advisor%20Title%20Trickery%20October%202016.pdf [/url]

This looks at how securities commissions ignore Securities Act laws against misrepresentation.

2. Recently completed by Larry (with no public release until SIPA gets a shot at it’s own revisions and release of its own) is an EXEMPTIONS TO THE LAW report found here http://www.investoradvocates.ca/viewtopic.php?f=1&t=143 This looks are how securities Commissions will exempt the law, without apparent regard for public protection. (it is still for research purposes at this point)

In a curious case of "style" over truth, two Canadian newspapers have said that regardless of how a person spells the word "advisor", in their "newspapers" they spell it "adviser". Hmmm. Wonder why?

Recently, this writer gave an hour long presentation involving the GRAND DECEPTION (see forum topic of this title). In short, the grand deception is the systematic use of people who

(a) do NOT have the CSA (or in the US the SEC) license or registration category that would enable them to call themselves "adviser" (a legal category with duties)and (b) on NO uncertain terms do they wish to let customers know that they are commission salespeople

What to do?

Of course, just skirt any rules, codes or laws against misrepresentation of titles, and call yourself an "advisor" which is a "non-regulated" title and not a license nor registration category. Will the press pick up on that? (…..how much advertising money would we have to follow to learn that answer….:)

The media steps right up with a "style policy", saying that they will deem that any use of the word "advisor", will automatically be corrected to read "adviser". Bit of a ruse here……

Here is the article you can read for yourself, and the comments from two newspapers as well as from founder of SIPA.ca the Small Investor Protection Association of Canada.==================

Yet the RCMP and local police forces are doing nothing about it, Larry Elford told University of Lethbridge students and guests. What’s more, he said, the federal government has changed the Criminal Code of Canada to shield banks from prosecution from fraud charges.

But because Alberta and some other jurisdictions reject plans for an effective federal securities watchdog for Canadians, Elford charged, banks and other financial corporations can get away with the kind of “investment advice” that saw Lethbridge and other cities lose million of dollars on “asset based” paper.

The billion-dollar figure, he said, comes from a University of Toronto report covering Canadians’ retirement savings investments along with all kinds of commission-earning financial advice. But neither the federal nor the provincial governments are ready to take on the big banks and other financiers who support their political parties.

Formerly an investment industry insider, Elford screened video clips of President Obama and others warning Americans not to be taken in by financial “advisers” who are actually commissioned salespeople. While many appear to be acting in their clients’ best interests, in reality they’re recommending products that benefit themselves.

While it should be more proactive, he suggested the U.S. Securities Commission has the power to protect everyday investors – a safeguard not available to their counterparts in this country.

“The people in power like it the way it is.”

Today in Canada, Elford explained, investment sales staff at banks and investment houses are expected to rack up $2,000 in commissions every day – with the companies taking the biggest share.

“You will be expected to achieve or leave,” he told business students who might be considering the field. More than 150,000 Canadian sales people are out there promoting various investments, he pointed out.

With Certified Financial Analyst (CFA) credentials, Elford said, they should be able to find a career that doesn’t rely on commission sales. But few people in the industry have earned that designation.

Most call themselves “advisers,” he said. In law, that exempts them from any fiduciary responsibility to their clients – because for what it’s worth, Canada’s law applies only to “advisers.”

All “advisers” are required to do, he said, is offer clients a product they consider “suitable,” no matter whether the seller reaps more benefits than the buyer. But by agreeing to higher than minimum service fees, he warned, investors can see half their life savings disappear.

“You could retire 10 years earlier,” he said, simply by taking the time to find the best available plan with the lowest commissions and fees.

Charges against unethical “advisers” are hard to prosecute, Elford said, so police services don’t want to deal with them. He’s asked repeatedly to speak to the Lethbridge police chief and his economic crimes officers, he said, but there’s been no response.

“And don’t get me started on the RCMP,” he added.

In hopes of making more Canadians aware, he told new media students the Small Investors Protection Association of Canada is offering cash prizes for the best videos getting that message across.

===================

I enclose an outline of the issue causing us concern, for your consideration prior to a telephone discussion.

We have been encountering journalists writing an article about an issue that we believe is of fundamental importance for Canadians.

Each year Canadians are losing huge amounts of their savings when they have place their trust in a “Financial Advisor”.

The Securities Acts define Adviser and describe responsibility to look after investor best interests.

Dictionaries define Adviser and indicate Advisor is an alternate spelling.

Most Canadians believe the two words are synonymous and therefore trust a person using the “Financial Advisor” title.

The investment industry however treats the two words differently. They consider “Financial Advisor” to be an unregulated business title so that it is not confused with the obligations for Adviser in the Securities Acts.

There are three main registration classifications for persons in the investment industry who deal directly with clients:

The first two have a fiduciary responsibility but the latter has no legal responsibility to look after a client’s best interest.

These sales persons are motivated by commission in accordance with a commission grid. As a result it is common practice to sell products that generate the highest commission and use leverage strategies to increase the assets on which commissions can be generated.

We feel it is unfair, if not illegal, to mislead the public by allowing sales person to use the “Financial Advisor” title. Most people are not aware of the spin on this word.

As a result Canadians have been placing complete trust as well as their life savings in the hands of commission driven sales persons. This is incredibly unfair.

Recently the Lethbridge Herald published an article that should have been informative but because the style of most publications is to always spell the word as Adviser. As a result the true message does not get published.

To illustrate the point, the following is an excerpt for the Herald article.

“Most call themselves “advisers,” he said. In law, that exempts them from any fiduciary responsibility to their clients – because for what it’s worth, Canada’s law applies only to “advisers.” “

Does that make sense to you? The statement is wrong and does not convey the truth. But if the first word had been spelled "advisors" it makes absolute sense.

The response we received when we questioned the Herald was:

“Hi, Stan,

Thanks for your letter. Just to explain, we follow the Canadian Press style for spelling, which spells "adviser" with an "e" instead of an "o." According to the Oxford Dictionary, the word has the same definition whether spelled with an "e" or an "o."

Dave SulzLethbridge Herald”

There have been other instances with national papers including the Globe and the Post, so we would like to get some explanation as to why this is allowed to happen. It misleads people.

CANADIANS often lament our lack of an equivalent to Jon Stewart’s Daily Show (no, the Rick Mercer Report does not count), but that barely describes the dire state of media criticism in this country.

The United States has NPR’s On the Media, Gawker, and numerous blogs and newspaper columns that dissect journalism from various perspectives; we have almost nothing comparable. The UK, beyond its cutthroat Fleet Street wars, has Charlie Brooker’s Weekly Wipe and the Media Show, both on the BBC. Australia has Media Watch on TV and Media Report on public radio. Al Jazeera English has Listening Post. Media analysis is an established beat in almost every nation with a free press, and it’s a given that journalists must scrutinize our own profession as diligently as we would any other.

Canada is a strange exception. Although we have a few media reporters, our attempts at substantive criticism never last long. Antonia Zerbisias served as the Toronto Star’s media columnist from 2003 to 2007, but then she changed beats and the position was eliminated. Decades ago, CBC Radio tried out a show called Media File, which sought to provide an inside glimpse of the newsmaking process. Sunday Edition host Michael Enright, then a CBC executive, remembers the show failing because journalists refused to appear as subjects. “It didn’t last for more than a season,” he told me in an interview last year. “People in the media got nervous.”

Why would journalists get nervous? Here’s a theory: because the Canadian media is insular, heavily concentrated in Toronto, and more of a club than an industry. I learned this at my first real job, as a chase producer at the CBC. My boss’s husband was a Globe and Mail reporter, and her boss’s husband was a Globe critic. Two others on our team lived with each other, and soon I was dating within the building as well. (I was laid off in 2008, following a round of budget cuts.) This is not particular to Canada. Journalists worldwide are notorious for inbreeding; even our friends tend to be colleagues. In a country this small, however, such cross-pollination becomes an inhibitor to free expression. Complain about a column at a cocktail party, and its author might overhear you. Challenge an item published by a rival outlet, and sooner or later its editor will be your boss. Our industry is tiny and shrinking; egos are sensitive and memories long. It is easier to take aim at politicians and celebrities, keeping opinions about one another’s work to ourselves—or at least out of print and off the record.

When the industry considers itself, it does so to dole out awards. Laurels include the Canadian Association of Journalists Awards, the Canadian Journalism Foundation Awards, the National Magazine Awards, the National Newspaper Awards, and the Canadian Online Publishing Awards. A comprehensive list might add the Michener Awards for excellence in public service journalism, the Kenneth R. Wilson Awards for the business press, the Canadian Community Newspaper Awards, and a flurry of regional honours, stand-alone prizes, and academic fellowships. Given the financial state of the industry, the running joke—that Canada has more awards than full-time journalists—may soon cease to be an exaggeration.

The constant bestowal of trophies within the trade illustrates not just how self-congratulatory the Canadian press is, but how badly we have lost sight of who we are. We seem to be under the impression that we are doing something dignified and respectable. Elected officials pander to these airs with Senate appointments and calls to the Order of Canada. A few journalists have even been tapped to serve as Governor General. This is all very nice for a handful of beneficiaries, but it has proven toxic for the profession; smugness and self-righteousness do not make for a healthy or accountable press. The job is adversarial by nature. Our duty is to inquire, provoke, and irritate without reverence. When we stop applying that principle to ourselves, rot sets in.

EXAMPLES ABOUND of what can go wrong when we don’t look under the rug. Many in the Canadian media knew that Globe columnist Margaret Wente was getting sloppy: borrowing arguments, sources, and entire passages from other writers without adequate attribution or verification. But nobody dared to write about it until a blog by artist Carol Wainio, cataloguing Wente’s transgressions, attracted the attention of a media columnist at the Guardian. The Toronto Star initially labelled its coverage of the Rob Ford crack video “exclusive,” even though Gawker was the first to report on it; without the New York website’s scoop, the Star might never have pulled the trigger. Eventually, Star publisher John Cruikshank quietly issued an apology to Gawker, but it is worth noting that the mea culpa was never printed in his paper. He uttered it during an On the Media appearance.

Other, less well known problems have cropped up. In 2012, CBC News and Parks Canada entered into a confidential contract. The document, leaked to an independent news site, revealed an unusual arrangement: the department paid CBC News $65,000, for which the broadcaster agreed to provide coverage on television and online. Sure enough, a failed Arctic shipwreck salvage project undertaken by Parks Canada was featured on two episodes of The National and extensively on the CBC’s website. Management later denied any wrongdoing, insisting that the CBC retained editorial control, and describing the payment as a fiscally responsible way to recoup costs for creating a “joint website” with Parks Canada—a claim that went unchallenged in the press.

Some issues fall completely under the radar. During last summer’s wireless wars, when Bell, Telus, and Rogers were engaged in a relentless PR campaign to sour Canadians on Verizon entering the market here, someone at CTV News leaked a series of confidential emails. (CTV is owned by Bell Canada but claims editorial independence from its parent company.) Included was a note sent from Bell Media president Kevin Crull to, among others, Wendy Freeman (head of CTV News) and Chris Gordon (head of radio and local TV). In it, Crull alerted them to a study suggesting that, contrary to popular belief, Canadians pay reasonable rates for wireless service, and he highlighted findings that supported Bell’s business agenda. A segment about the study aired on the CTV News Channel that day, and Gordon forwarded Crull’s email to a few employees, writing, “Kevin is asking if this report can get some coverage today on Talk Radio.” I filed a piece about the incident for Macleans.ca, where I was on contract as a blogger. It never ran.

INTRIGUED BY STORIES such as these and excited by the opportunity to fill a void, I pitched media criticism—sometimes as a column, sometimes as a radio program—to our various news organizations. I didn’t get far. I was told that Canadians may be passingly interested when the New York Times’ Maureen Dowd or CNN’s Fareed Zakaria commits plagiarism, but they couldn’t care less when a local pundit lifts a line or two. Conflicts of interest, political interference, outright fabrication: all are juicy enough stateside but petty quibbles up here. The term “inside baseball” came up more than once; as for how sausages are made, I was assured that no one wants to know.

None of these rationales satisfied me, so last fall, after my fourth rejection, I found a corporate sponsor and independently launched a media criticism show. Canadaland, a weekly podcast and blog, turned into quick poison for my career. Freelance work dried up almost instantly, and my phone stopped ringing with requests to serve as a talking head. Worse, I had trouble finding guests of my own. Most journalists turned me down flat (including the editor of this magazine), fearing repercussions, so I expanded my scope to include filmmakers and comedy writers.

The situation improved after my first big scoop. In February, Canadaland broke the news that National anchor Peter Mansbridge had been paid to speak at an oil industry event. Similar information had already emerged about the pundit Rex Murphy, whom CBC management defended on the basis that he is an editorialist, not an impartial reporter, and a freelancer, not subject to the corporation’s rules for full-time employees. However, Mansbridge is both a reporter and a staffer, not to mention chief correspondent of CBC News. The oil sands are one of the most contentious issues in Canada, and here was the public broadcaster’s top journalist moonlighting for one side of the debate. Three similar speaking engagements for other oil groups came to light—each worth as much as $28,000.

The story ricocheted from Twitter to news websites to the Senate, where CBC president Hubert Lacroix was called on to defend Mansbridge’s activities. Many established writers, politicians, and academics spoke up to say that journalists should not take money from the organizations they cover; at a minimum, such conflicts must be disclosed. At this point, even CBC Radio had to treat the issue as news. As It Happens broke the silence with a thorough piece on the issue, and The Current and Q followed. Both Mansbridge and CBC management were invited on the air to discuss their positions, but they declined.* The CBC was stonewalling the CBC.

Eventually, Mansbridge defended himself in a blog post. He denied any wrongdoing, offering that he delivers about twenty speeches a year, half of them paid. None were a secret; in some cases, he had publicized them himself. “Bottom line,” he wrote, “I follow the rules and the policies the CBC has instituted governing journalists making public appearances.” Was he lying? Absolutely not. He was certain he was following the rules, because management assured him he was—but he was wrong. In reviewing a slew of public complaints about Murphy and Mansbridge, CBC ombudsman Esther Enkin found that “it is inconsistent with policy when CBC news and current affairs staff accept payment from groups that are likely to be in the news.” The rules are extensive, clear, and leave little room for interpretation: outside contracts that lead to the mere appearance of conflict of interest are forbidden.

What are we to make of this incident? That CBC News management is corrupt? That Mansbridge is? No, but the truth may be more unsettling: that the Canadian media’s lack of scrutiny allowed both the anchor and his bosses to believe their behaviour was above board. Each time Mansbridge broke the rules without getting called out, it was taken as further proof that he was not breaking the rules at all. However, there is a bright side. In this case, unlike the Guardian criticizing Wente or Gawker hounding the Star, we cleaned up our own mess. Everyone from Vice Canada to Huffington Post Canada to the Globe worked the story, because they knew their readers would be interested; even the news organizations that had rejected my media criticism pitches picked it up. Some readers were outraged. Others had no problem with journalists taking money from the oil industry—but nobody said they wished they hadn’t heard about it. It turns out that people do want to know how sausages get made after all.

With the following posting, an example of yet another government paid "helper" who is willing to be willfully blind, I am still at the following statistic on systemic financial abuse of the elderly and all Canadians: 100% of persons in Canada, who are paid a salary and claim in any way to protect the public, will "look away" and deflect cases which are in any way "difficult", or which might cause them to have to find moral courage to go after systemic financial abusers. 100%.

This is after more than 20 years of research and witness to financial abuse of Canadians.

Below is yet another "brush off" by a government paid person who wishes to have nothing to do with an abused elderly man. I am saddened and ashamed to meet yet another bureaucrat who is unwilling or unable to protect the public on even simple matters. Here is her reply to a request to look over 60 pages of financial abuse documentation by the gentleman:

The man involved is being run ragged chasing after the many "public protection" organizations. He is over 70 and recovering from open heart surgery this year. Financial elder abuse by the system and by persons posing as professionals is "fostered" in the country with the "worlds strongest financial institutions".

Where formerly it was the business news in Canada that was the most coveted "handmaiden" of the financial spin industry, we now see evidence of academics being brought into the fold. Being hired to do "academic" study to help reinforce marketing spin of the industry.

Today, it is an entire industry hiding honest disclosure for all (150,000) retail commission salespersons, who were previously all licensed in the license category of "salesperson"…….hiding this license category from the public and instead looking for more "trust building" terms like "advisor" or wealth manager. Despite the "advisor" term being another legal license category which virtually none of the 150,000 retail salespersons meet.

Despite the suggestion by use of the title "advisor", that the customer might expect the "advice" given to be trustworthy, honest, fair and "in the customers best interest". Not proven true in about four to of five cases based on industry sales stats of things like DSC funds and wrap accounts. (IFIC) In fact, the industry has collaborated among the "stakeholders" and removed the requirement that the advice be in the customers best interest.

Today it is a ruse of trying to fool the public into the false belief that the commission salesperson, (called advisor) is actually a professional "advisor" who will serve your interests first.

False four times out of five according to the industry sales stats.

Further fooling the public into a false sense of confidence in the portfolio management skills of those people who need to spend up to 80% or 90% of their time looking to "gather" assets and earn their next commission. Portfolio management is a vastly different role than the role of a commission salesperson, and yet most Canadians I speak with believe that their "advisor" is both a portfolio manager, AND a licensed professional advisor with a duty to give advice that is in the best interests of the customer.

=======================

51 pages of academic study called "THE VALUE OF ADVICE". Notwithstanding that it was sponsored by financial industry stakeholders who earn billions by misrepresenting "product salespeople" as "professional advisors". Notwithstanding that this academic failed to address even the differences between a (1) salesperson, (2) people licensed as advisor and (3) people NOT licensed but calling themselves "advisor" (see #1) and (4) portfolio manager. Here is how your money gets fooled every day. Buy an "academic" study. http://www.cirano.qc.ca/pdf/publication ... Advice.pdf

The entire study seems to not know, explain, or understand even the most basic underlying premise………namely "what is the difference between a (1) financial products salespersons, and (2) a licensed and registered "advisor", and (3) real portfolio management expertise.

The entire thing seems to not know, explain, or understand even the most basic premise………namely "what is the difference between a (1) financial products salespersons, and (2) a licensed and registered "advisor", and (3) real portfolio management expertise.

I am your “stockbroker”. I am a commission salesperson, making a living only when you buy or sell one of my investment products. (or I "gather" your assets and put them in my fee based schemes) I wear this mask because you will not trust me as much if I tell you I am a commission salesperson. But that is what my license read until Sept 2009. After that date, the 13 Securities Commissions in Canada DELETED the word “salesperson" from every securities act in the country. It was too “informative”, to “clear”. They changed my license (and all 150,000 retail investment salespersons in Canada) to “dealing representative” so you would know even less of what our role is.

We get away with this because we are a “self regulating” industry. We “police” ourselves.

Since we police ourselves, we can even go further with the mask. We can call ourselves “advisor” without being registered or licensed as an advisor. We can call ourselves “advisor” even after having removed our requirement to give advice that is our customer’s best interests. All under the safe protection (for us, not you) of “self regulation”.

We go one step further with our mask of self regulation. With our advertising and our marketing, we lead customers into the false belief that we will help “manage your money”. Truthfully we are nowhere near talented at portfolio management. We sell products. We need to gather assets to sell. We do not have time for professional portfolio management. But we will lead you to believe this as well, if it makes us more.

For some background, some facts, some details and more information on any things mentioned herein, please visit the forum for investment professionals, without the spin, at http://www.investoradvocates.ca

There you will find 40 topics related to everything involving retail investing, investment sales, misconduct and malpractice. The “tricks of the trade.”

Lemme show you a cherry of a car. Great deal. Really. All original parts. Four wheels. An engine. A few dents that we'll buff out.

On June 6, 2012, the House Financial Services Committee will hold a hearing to examine H.R. 4624, the Investment Adviser Oversight Act of 2012, a bill co-sponsored by Committee Chairman Spencer Bachus (R-AL) and Carolyn McCarthy (D-NY). The Bachus-McCarthy bill proposes to amend the Investment Advisers Act of 1940 by providing for the registration and oversight of national investment adviser associations. This bill would authorize “one or more self-regulatory organizations (SROs) for investment advisors funded by membership fees.”

In my recent column “Congress Prepares To Sandbag Investors And Their Financial Advisers With More Wall Street Self Regulation,” (“Street Sweeper,” May 31, 2012), I characterized the Bachus-McCarthy bill “as little more than a Congressional con game to foist the Financial Industry Regulatory Authority (“FINRA”) upon the investing public and the investment advisory community. . .” Not much doubt where I stand on this legislation or how I feel about it.

A Wolf In Sheep’s ClothingAs the Investment Adviser Oversight Act of 2012 makes its way through the legislative process, supporters and opponents of the bill are going public with their positions. Among those interests pushing for the bill’s approval is the Financial Services Institute (“FSI”), which I consider an industry trade group. According to FSI’s “About Us” page on its website ”everything we do starts and ends with our crystal clear mission: to create a healthier, more business-friendly regulatory environment for independent financial services firms and independent financial advisors . . .’

FSI is upfront about its advocacy for a “more business-friendly regulatory environment” for its members. Given my libertarian leanings, my well-documented animosity for big government, and my passion for free enterprise, I applaud FSI’s candor and respect its robust lobbying on behalf of its members. That being said, Wall Street is not merely a marketplace for investment advisors or stockbrokers but is also a venue for retail investors, institutional investors, private issuers, and public issuers. When the regulation of the financial markets is unfairly skewed in favor of only one constituency, the consequences are often disastrous.

Although FSI’s voice should be heard on the merits of the Bachus-McCarthy bill, industry reformers and public investors would be well advised to view this trade group as a wolf in sheep’s clothing.The alternative to self-regulation is not equally ineffective government regulation but a more expansive private-sector regulator — which should provide for a more representative and independent form of regulation. FSI’s position needs to be considered because the organization has somehow managed to obtain one of only six witness seats at the June 6th hearing for its President and CEO, Dale Brown.

The Devil We HaveOn May 29, 2012, FSI published a letter: FSI Uncut: SRO for RIAS / A Message from FSI Chair Joe Russo, which states, in part:

[T]he option of a brand new SRO or multiple SROs is also troubling. For FSI to back a strategy that could set up one or more new regulators that we don’t know and don’t have influence with wouldn’t be taking full advantage of the relationships we’ve worked years on strengthening. . . .

. . .

FINRA, as we said from the beginning, isn’t perfect. They are actually nowhere near perfect. But, they do have the resources to do the job, and they would be much more affordable for our members from a small business cost standpoint than the SEC user fee proposal.

FSI has a good working relationship with FINRA. There is an FSI member on the FINRA Board, there are 20 FSI members on FINRA district committees, and FSI senior staff has a close working relationship with FINRA senior staff. Certainly, we don’t always get what we work for with FINRA –we wish we could say we had a perfect record, but we don’t. But we do have many wins in terms of changing proposed rules and regulations coming from FINRA to our members’ benefit that we can hang our hat on.

In FINRA becomes the SRO for RIAs, FSI pledges to you that we will stop at nothing to try and ensure the most responsible, efficient, and least intrusive regulator for RIAs as possible while protecting investors. And if FINRA’s not doing their job, we’re the first you’ll hear it from.

Contrary to his intent, FSI Chairman Russo’s message makes a strong case AGAINST the Bachus-McCarthy bill.

Taking AdvantageAs Chairman Russo asserted in his letter, FSI doesn’t want to deal with regulators that “we don’t know and don’t have influence with” because that would inhibit the trade group from “taking full advantage of the relationships we’ve worked years on strengthening.” From the larger perspective of implementing reforms on Wall Street and ensuring a level playing field, those words are frightening.

In supporting FINRA’s designation as the new investment advisory community’s SRO, FSI’s goal is not to promote an effective regulatory scheme. No, the trade group’s ambition is to keep in place its influence and relationships with FINRA. Not exactly the hallmark of a regulatory regime all market particpants should get behind. The exaltation of cronyism seems to be FSI’s goal in getting behind the Bachus-McCarthy bill.

Imperfection Is OkayRusso laments that FINRA “isn’t perfect. They are actually nowhere near perfect.” Hardly a glowing recommendation. According to Russo, the counterbalance that FINRA offers for its deep flaws is that it has “the resources to do the job, and they would be much more affordable for our members from a small business cost standpoint than the SEC user fee proposal.” I mean, seriously? The highlights of this hard-sell pitch is that FINRA does a crappy job regulating but, hey, it has resources (whatever that means) and it’s an affordable option?

Imagine going to a used car lot and being shown a mangled wreck, which the salesperson points out still has four wheels, a windshield, and an engine — plus it’s cheaper than everything else for sale. Of course, the engine is pushed into the trunk, the rear axle is split, the transmission is shot, the brakes leak, and you’re going to get seven miles per gallon. Listen, bub, this car has real fake leather upholstery and, sure, it’s nowhere near perfect but for basic transportation and cost, well, you know, it’s a cherry.

Wink Wink, Nudge Nudge, Say No MoreWonderful — Wall Street’s reputation is in the toilet and now one of the industry’s trade groups is putting its influence behind promoting the perpetuation of self regulation and the coronation of FINRA as the investment advisers’ SRO. Aware of FINRA’s unpopularity among many of its current members, industry reform factions, and public investor advocates, FSI’s Russo tries to salvage the sale to his own members by playing the crony card: “FSI has a good working relationship with FINRA. There is an FSI member on the FINRA Board, there are 20 FSI members on FINRA district committees, and FSI senior staff has a close working relationship with FINRA senior staff. . .”

All of you public investors and industry reformers catch that? FSI has its hooks into FINRA. The group and the SRO have an understanding. The trade group has someone on FINRA’s Board and another 20 folks on local committees. A cynic might wonder whether those FINRA seats were incentives or rewards but, hey, who knows how many devil’s bargains are made everyday on Wall Street? Why just focus on this unsettling bit of boasting by a trade group?

In desperate need of effective Wall Street regulation, Representatives Bachus and McCarthy have launched a bipartisan effort to put FINRA into play as an expanded regulator with jurisdiction over a larger membership. At the very least, one would expect some push-back from an industry that is targeted for a new version of Congressionally mandated regulation (as if Congress has had any laudable results tinkering with the financial services industry). Instead of any meaningful reservations, FSI ”pledges” to its members that the trade group “will stop at nothing to try and ensure the … least intrusive regulator for RIAs . . .” Given the trade group’s support for FINRA, that’s quite the dubious accolade: The least intrusive regulator!

And let’s not omit that lovely fillip that FSI Chairman Russo offers to press his point. His trade group is here to “create a healther [sic], more business-frinedly [sic] regulatory environment for you, our members. We’re here to make your life easier . . .” Great job Bachus! Super effort McCarthy. The supporters of your bill deem FINRA imperfect and reverentially speak of the SRO as a crony that can be influenced towards taking it easy on those it will supposedly regulate.

Small wonder that I don’t trust the Democrats or the Republicans. Not much of a surprise that I don’t trust either political party to do anything other than ensure their campaign contributions and the status quo of Washington, DC. Shoddy. Shameful. A political sell-out.

With all due respect to FINRA, I don’t think that the regulator’s record for the last decade has been anything to point to with pride — first, you’d have to explain where you were with Madoff and Stanford; and then we can discuss some more recent messes such as MF Global or JP Morgan. Maybe we can ask both FINRA and FSI what they think about the SRO having nominated a senior Deutsche Bank executive to FINRA’s Board only one day after his firm agreed to pay a $202 million settlement in a Department of Justice case involving allegations of mortgage fraud; see: “Feds Slam Deutsche Bank But Next Day FINRA Nominates Executive To Its Board“ (“Street Sweeper,” May 15, 2012).

In terms of earning an expanded regulatory role over the RIA community, sorry, but I don’t think that FINRA has earned it. Further, the SRO model is so flawed and ineffective that I think it ridiculous for the investing public and industry reformers to be saddled with more of the same. Contrary to FSI Chairman Russo’s advocacy, it’s just not enough of an endorsement for the rest of us that FINRA has resources, may offer cheaper regulation, and has been disposed to nominate FSI members to its various elected offices.

Where we should demand excellence, we are told to settle for adequate and affordable — and to sort of overlook a history of failures.

Spin CycleNASDAQ didn’t mangle the Facebook IPO — no, it just wasn’t a perfect offering. The price per share of Facebook didn’t drop some 25% — no, the shares are now more affordable. JP Morgan didn’t lose a few billion in trades — no, the firm enriched the counterparties on the other side and has more influence with those industry participants.

Dear Globe and Mail: We need a few more articles about the benefits of using an investment "advisor" (wink), while avoiding any mention of commission selling, actual license or registration categories, ability to no longer put the interests of the client first. You know the routine. Thanks, again for all your help.

Posted on Jan 18, 2012Posted for Ian Mulgrew, from the pages of The Sun:

Canada’s top judge is warning that the legal system doesn’t work for ordinary people and courts are fast becoming the domain of the rich – or the indigent.

In a startlingly frank speech at a University of Toronto legal conference, Supreme Court of Canada Chief Justice Beverley McLachlin last week was especially critical of high legal fees -now averaging nearly $340 an hour.

“Do we have adequate access to justice?” Justice McLachlin asked.

“It seems to me that the answer is, no. We have wonderful justice for corporations and for the wealthy. But the middle-class and the poor may not be able to access our justice system.”

Her speech was a near-perfect echo of one delivered in November by B.C.’s top jurist, Provincial Court of Appeal Chief Justice Lance Finch, her former benchmate. He, too, said the situation is unfair and that the profession must address “the elephant in the room.”

“Everyone knows it’s there, but no one wants to talk about it -I think it is time to open the conversation. … No matter how much we may all wish to avoid the subject, high legal fees are an issue that must be addressed.”

The chief justice agreed and gave the discussion even more urgency.

Like Justice Finch, Justice McLachlin in her critique focused on the monopoly lawyers enjoy with the implicit warning that if the profession doesn’t fix this problem, governments will -and the bar might not like their solution.

“If you’re the only one who can provide a fundamental social need from which you benefit, I think it follows that you have to provide it,” Justice McLachlin said.

“And I don’t think it’s enough to say we are providing it for the rich and the corporations. You have to find a way to provide it for everybody.”

Various Band-Aid measures are being tried, such as selfhelp Internet sites; judges and courts are becoming more accommodating to self-represented litigants; simplified rules and procedures are being adopted.

In an interview last year, Justice McLachlin drew the analogy between legal help and medical care -sometimes you can go to the drugstore and get a pill; but a lot of times, you need an expert who can diagnose the ailment, determine the proper treatment and present you with options.

No matter how many how-to websites are created or freeadvice lines are staffed, people still need lawyers.

And, at the moment, any protracted court battle can generate legal costs that will crush middle-class wage earners.

Denied reasonable access to the courts, Joe and Joan Six-Pack are increasingly being invited to solve their own problems through self-help or vigilantism.

“We can draft the best rules in the world and we can render the best decisions, but if people can’t have access to our body of law to resolve their own legal difficulties, it is for naught,” Justice McLachlin said.

And this is not only our problem -it’s a concern in Britain, America and other jurisdictions that have seen a more and more complicated body of modern law develop and legal fees rise accordingly while governments reduced legal aid programs to funding only those facing serious criminal charges or the indigent.

Here’s the rub, however: most of the legal troubles faced by the middle-class are family or financial in origin.

Most can usually be resolved quickly and easily if addressed promptly, but can quickly spiral out of control if allowed to fester.

No matter what your metaphor -the elephant in the room or the writing on the wall -the situation is alarming.

As Justice McLachlin said: “How can there be public confidence in a system of justice that shuts people out; that does not give them access? That’s a very dangerous road to follow.”

ROGUE REGULATORS HURTIN ALBERTANS......or.......How your own government sells you out for money.

Defective investments and investment selling malpractices occur repeatedly in Alberta. On average, they can easily skim half of Canadians retirement savings, over a lifetime. One method is when the Alberta Securities Commission (ASC) gives investment firms permission to violate laws (exemptions) when selling investments. The University of Calgary is out $67 million and the City of Lethbridge $30 million. Across Canada, $32 Billion went missing with just one type of investment. There are a thousand others that you are not told of before your money goes into them.

The cost of every crime in Canada is near $40 billion. (Justice Canada) Financial malpractice by regulators and professionals equals the cost of every crime combined. These are un-prosecuted at the high end for several reasons: First, a self regulating industry sets and enforces it’s own rules. Second, the “respected” status of persons involved exempts them from examination. Third the reputation protection efforts of the regulators. Finally, an RCMP (IMET) budget of only $16 million (2009) for major economic crimes, for all of Canada. This is less money than the budget of one local car dealer in my town. We do not police high level economic crime in Canada. It is simply too profitable in the circles of “respected” practitioners when they can transfer (http://www.investoradvocates.ca research) easily $60 billion each year from the hands of trusting and vulnerable Canadians, into the hands of financial abusers.

An unfair playing field exists if the public is not notified when financial companies get permission to violate the law or if this is done without meeting a public interest test. Questions unanswered by three Alberta finance ministers:

What public interest is served by allowing our financial laws to be violated?

Why are these laws “exempted” without public input or even public notice?

Where is evidence of the public interest obligation of this regulator (ASC)?

Alberta Finance response: “In this particular situation it appears the commissions carefully considered the situation and acted properly in granting the exemptions.”

ASC reasons: “Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.”

Money from my city (Lethbridge) was “invested” or used, to insure losses on sub-prime investments held by other financial players. Thus our taxes insured (and paid) some of losses on investments owned by Deutsche Bank of Germany. (credit default swaps) The ASC helped facilitate (for a fee) the sale of these to all Albertan’s although they did not meet our laws. (Securities Act)

Goldman Sachs, JP Morgan, Citibank, Lehman Brothers, Enron, Bank of America, have all taken advantage of friendly regulators and gained permission to skip the law, right here in Alberta. I tell audiences that you will get more notice if your neighbor plans to build a garage too close to your fence, than you will get if your life’s work is being invested in something that did not meet Alberta laws.

I hope this information falls on Alison Redford’s desk and she is able to give us a fair explanation, or some change to help the average Albertan just trying to save and retire. For their money to be gobbled up by investment giants, without even so much as a warning about the legality, appears to me to be nearly criminal.

Public protection is the supposedly the top mandate of the ASC. I find that this mandate has been sold out for other considerations. Contact me at lelford@shaw.ca if you seek help, change or to make corrections to anything written herein. Legal action for gross negligence or breach of the public trust may be a potential recourse and is being researched. Millions in fees have gone to the security commission, billions in profits to “respected” firms, and billions in damages to the public. Follow the money. Get some of it back.

Larry Elford, former CFP, CIM, FCSI, Associate Portfolio Manager, 103 - 7 A Ave South, Lethbridge, AB, T1J 1N3 403 942-5071Larry Elford is a former investment industry veteran with two decades of experience inside Canada’s largest investment firms. He now gives back by making the public aware of practices which are damaging to their finances. (I am happy to cut this to 500 words or less if letter to the editor format would be preferred. Thanks)

THU06MAY2010Ottawa Misleads on Canadian Bank Bailoutswritten by Erik AndersenSubmission to the Ministerby Erik AndersenDear Chairman; it is now being said publicly that Canada’s banks were never given “bailout” help by the Federal Government. As recently as this morning on a CBC Early Edition interview out of Vancouver, a guest made this assertion and Mr. Cluff let it go unchallenged.On October of 2008 Prime Minister Harper publicly announced that “Canada Mortgage and Housing (CMHC) will purchase up to $25 billion in insured mortgage pools as part of the Government of Canada’s plan, announced today, to maintain the availability of longer-term credit in Canada.”

On November 12, 2008, another $50 billion allocation was announced. The official text was; “The Honourable Jim Flaherty, Minister of Finance, today announced the Government will purchase up to an additional $50 billion of insured mortgage pools by the end of the fiscal year as part of its ongoing efforts to maintain the availability of longer-term credit in Canada.

This action will increase to $75 billion the maximum value of securities purchased through CMHC under this program”.

By this program the commercial banks loaned money to the federal government so that it in turn was able to purchase the above mentioned mortgage pools. Do you and your fellow Members not consider this to be a “conflict of interest” transaction at the minimum?

Mr. James RajotteChairman of the Standing Committee on Finance

Sixth Floor, 131 Queens Street

House of Commons

Ottawa, Ontario, K1A 0A6

Ref; Federal Financial aid given to Canadian Chartered Banks

A report by Bloomberg dated January 23, 2009, indicated the government had pledged as much as $200 billion in this matter.

Regardless of the modifiers, the above record of financing activity clearly indicates that the citizens of Canada traded cash money that had to be borrowed (think or our deficit) for the purchase of “insured mortgages” that the world has come to recognize as code words for “toxic assets” or “liars loans”. By this program Canadians have lessoned the financial risk burdens of the shareholders of our banks. Also, by this program Canadians have enabled our banks to engage in foreign acquisition such as the purchase of Commerce Bancorp of new Jersey by TD Canada Trust; the Alabama National Bancorp by Royal Bank’s subsidiary RBC Centura; the ABN AMRO leasing division by the Royal Bank; etc.

Apart from the staggering conflict of interest condition this program represents it still constitutes a “bailout” as most Canadians now understand the word to mean.

As parliamentarians and particularly as members of the Finance Committee, please correct the public misconception that the Government of Canada did not “bailout” Canada’s banks when in fact we all still own $75 billion of their valueless paper.

Protection of persons and their rightfully acquired property is a central element of economic freedom and a civil society. Indeed, it is the most important function of government.

The key ingredients of a legal system consistent with economic freedom are rule of law, security of property rights, an independent judiciary, and an impartial court system. Components indicating how well the protective function of government is performed were assembled from three primary sources: the InternationCountries with major deficiencies in this area are unlikely to prosper regardless of their policies in the other four areas.

=============

Canada appears to be doing fairly well on the measure of overall economic freedom, see below image:

click to enlarge, click again to zoom in

However, the failing grade for Canada is in the area of a legal system consistent with economic freedom are rule of law, security of property rights, an independent judiciary, and an impartial court system as mentioned above. In this area, Canada is number 44 in the world according to this study. The measure of how "financially free, or financially well off" citizens are is strongly affected by this factor.

I have to say that from my limited perspective, Canada is suffering from a financially captured justice system, whereby those with the most money can purchase the best justice, and those with less, get less. I am a sceptic of course, so discount my opinion all you like, but I refer to similar mentions from former RCMP IMET heads, and also to comments from Madam Justice Beverley McLachlin, chief of the Canadian Supreme court. I suggest not that they are both agreeing with myself, only that their comments ring a similar tone about captured justice in Canada.

click to enlarge"Bill Majcher: The system is pretty much non-existent. You can fix something that is hemorrhaging, but if the body is already lifeless, you have to start fresh. We need politicians to admit that the system is broken from the top to the bottom. Canadians have to understand that we have a two-tiered justice system, where people with money can play the system. Show me a person who has gotten any sort of satisfaction from going to the authorities after being victimized by a white-collar fraud...who got their money back in a timely fashion and didn’t go through a lot of grief. I can’t think of a single person like that." From the September 24, 2007 issue of Canadian Business magazine

images.jpeg (12.39 KiB) Viewed 22075 times

"In my comments today I will touch on four such challenges:

the challenge of access to justice,the challenge of long trials,the challenge of delays in the justice system, andthe challenge of dealing with deeply rooted, endemic social problems."

A fictitious press conference that will never happen...... on crime and crime bills.......with the Harper government.

“Larry Elford here for investor advocates.......A couple of questions Mr. Harper........ahh, the extensive work you are doing towards fighting blue collar crime and building new prisons is, uuum, surprising, since this type of crime is in decline, as our population ages. Two questions please”:

“In the recent sub prime mortgage collapse, $32 billion of sub prime mortgage investments were frozen, collapsed and had to be bailed out by taxpayers and others in Canada. If we accept Justice Canada stats that the average property crime is about $5000 in value, then this mega crime of selling known toxic investments did damage in Canada equal to about 6 million property crimes. There was not a single prosecution in this matter.

Question, “Mr. Harper, will there be any focus on attempts to prosecute financial mega criminals, as there seem to be as much or more damage done by them, than by the rest of the crooks in the country?”

“Following up on the Harper focus on white collar crime in Bill C21, An Act to amend the Criminal Code sentencing for fraud, financial fraudsters who deal in public markets (like stocks, bonds etc) were allowed to “exempt” themselves from the penalties of this law. This appears to give a free ride around this law to fraudsters from bay Street”. (see viewtopic.php?f=1&t=188&p=3072&hilit=c21#p3071 )

Question, “Mr. Harper, is there a two tier system of justice, one for the poor and middle class, and a less onerous system for the rich or well connected, when greater economic damage appears to be done by our top financial players, with zero consequences and your government continues to focus entirely on small time crime?”

"The House of Commons committee that considered the bill declined to adopt amendments that would have eliminated accelerated parole review for white collar criminals and that would have made section 380(2) of the Code – fraud affecting the public market price of stocks, shares, merchandise or anything that is offered for sale to the public – subject to the two-year minimum mandatory sentence."

I believe the above to be a bold faced lie Ken. I was at the committee and no one in the room, aside from Liberal MP Marlene Jennings was even aware enough of this bill to realize...............to realize that instead of "declining to adopt amendments", they were completely blindsided by someone's clever cutting of section 380 (2) COMPLETELY OUT OF THE BILL.

In other words, they had removed a section of the criminal code, specifically for the benefit of "public markets" fraudsters (investment Bankers, Bay Street friends?) I find this really disingenuous both in the deliberate removal of a portion of the code (380 (2)) AND in the self serving plattitudes now handed out by this law firm. Where they possibly participants in the "work" done on this legislation?

(news from European situation, similar problems to our own)Dignity and Democracy

Escaping the Clutches of the Financial Markets

An Essay by Dirk Kurbjuweit

In today's Europe, the people are no longer in control. Instead, politicians have become slaves to financial institutions and the markets. We are partly to blame -- and changes are urgently needed to nurse European democracy back to health.

We are doing well. In fact, we're doing splendidly. The economy is booming, with 1.5 percent growth in the first quarter. We are as prosperous as we were before the crisis, which has finally been overcome. Congratulations are in order for everyone.The banks, Deutsche Bank above all, deserve particular congratulations. In the first quarter, it earned €3.5 billion ($5.1 billion) in pretax profits in its core business, and by the end of the year the bank will likely report a record €10 billion in pretax profits, its best results ever. That number is expected to rise to €11 billion or even €12 billion in two or three years.Less than three years after the peak of the crisis, it seems as if it never happened. That is true of the economy, but it also true of us as economic subjects. But is that all we are?

No, we are also citizens and participants in a democratic society. As such, we have no reason to be celebrating. Instead, we ought to be sad and outraged. Democracy, after all, is not doing splendidly, or even well. It is gradually becoming a casualty of the financial crisis.

Rage Directed at Politicians

Trouble is brewing all over Europe. Young people with little hope for the future are protesting in Spain. In France, 1.4 million copies were sold of a manifesto titled "Be Outraged." Young Frenchmen and -women are devising utopias that extend well beyond civil society because they no longer expect anything from it. A deep depression has descended upon Greece, combined with a rage directed at politicians and the rest of Europe.

In Germany, this is what politicians are hearing from their citizens today: "You spent billions to rescue the banks, and now I'm supposed to be footing the bill? Forget it!" Hardly anyone is willing to put up with their politicians any more. And German leaders have lost support -- and some of their own legitimacy.

They seem helpless, unable to come to grips with the euro crisis. They meet in Brussels, and they talk, argue and adopt resolutions, and yet nothing improves. Greece isn't getting out of its hole, Ireland and Portugal are teetering on the brink, and Spain and Italy are heavily indebted to a dangerous degree. And no politician is providing leadership.

And then there were the lies. Jean-Claude Juncker, the prime minister of Luxembourg, had his spokesman deny that a meeting of European Union finance ministers on the Greek crisis was taking place, even though that meeting was in fact taking place. It wasn't the kind of lie that frequently crops up in politics: the broken campaign promise. Rather, it was more crass type of untruth: the denial of a reality. Juncker no longer had the courage to speak the truth. He was guided by fear of the financial markets. His lie was a capitulation of politics.

Things Will Have to Change

This is what is so disturbing about the current situation: the fact that politicians seem so helpless and powerless. They have a new master, and it's not us, the people, who tend to intervene in milder ways. Rather, it's the ruthless financial markets. The markets drive politicians even further into anxiety, weakness, incapacity and lies. Those who govern us are now being governed by the banks. That's the situation.We could decide that we don't care because the economic figures are so good. But that would mean we are happy to play the role of the economic subject, to invest and spend money, all the while abandoning the original promise of democracy. Or we can say: We refuse to relinquish our role and political masters. But if that's our decision, things will have to change.

How has this happened? What are the consequences? And how do we extricate ourselves from this situation?

Part 2: The Reasons: Greed and a Dissolute Lifestyle

Would it be erroneous to say that those who are now at the top are the ones who caused the whole disaster in the first place? That would include Deutsche Bank, whose CEO, Josef Ackermann, has just announced such magnificent financial figures. When Ackermann was asked how concrete the bank's willingness is to contribute to solving the crisis, a November article in the German financial daily Handelsblatt says he replied by saying the issue is taking a "very unfortunate turn at the moment." The markets, Ackermann added, have reacted negatively to this debate. His remarks could be seen as a threat: Those who make demands will quickly find themselves up against the banks.

At Deutsche Bank's annual meeting last Thursday, Ackermann crowed that the bank was in the process of "bringing in the harvest." But the harvest of what? And from what seed? Investment banking alone is expected to contribute €6 billion to the anticipated €10 billion in annual profits. Have we already forgotten that excessively greedy investment banking triggered the financial crisis in the first place?

Deutsche Bank played a key role in that process. The United States government is suing a subsidiary of Deutsche Bank, accusing it of pursuing "reckless mortgage lending practices." Yet Ackermann continues to shape policy worldwide. As one of the major players on the financial markets, he is partly responsible for determining whether and under what conditions nations can borrow money.

The rating agencies also continue to participate in world politics, seemingly unperturbed as they issue credit ratings on which the fate of entire nations hinge because they determine the interest rates for government bonds. Belgium is in danger of losing its AA+ rating, and Fitch Ratings has just revised its outlook on Belgium from "stable" to "negative." Have we already forgotten that the big rating agencies were partly responsible for the financial crisis because of their positive valuations of bundles of assets that contained toxic securities?

Blame and Brazenness

So this is what the new masters look like. They were substantially to blame for part one of the financial crisis and is being brazen in part two. They are extremely jumpy, greedy and only interested in numbers. Those numbers inform the way they control and drive politics.

But why do politicians allow themselves to be controlled and driven? Why don't they simply shake off the unforgiving dominance of the financial markets? The answer is that they can't because the political world is dependent on the banks, and it has only itself to blame. Greece would not have fallen into the maelstrom of the financial crisis if it hadn't been deeply in debt. Greece has borrowed more money than it can handle, and it constantly needs to borrow even more. It has become addicted to credit because of its own dissolute lifestyle. As a result, the country has become a pawn of rating agencies, interest rates and the calculations of men like Ackermann.

In principle, this applies to all countries in the euro zone, including Germany. Although the German finance minister can easily service all loans, he too is dependent on ratings, interest rates and Ackermann's calculations. Through the euro, Germany is entangled with Greece, Ireland and Portugal, and its own financial situation isn't spectacular enough to eliminate all concerns. The German government cannot simply do what it thinks best. It must constantly take pains to avoid being pulled into the maelstrom itself.

The Clutches of the Markets

Now, policies of immoderation -- the urge to impose as few burdens as necessary on citizens while giving them as much as possible -- is coming home to roost. Such policies gave us a high standard of living; but now, partly as a result of the euro, it has delivered us into the clutches of the financial markets.

As such, it isn't just the banks that are at fault for the current disaster. Politicians also deserve their share of the blame. But that isn't the whole story either. We, the citizens, are also culpable. Don't we expect high returns from financial institutions, and don't we expect a smaller tax burden from the government while receiving generous subsidies and social benefits?

In other words, the financial and euro crisis are a reflection of our own wishes. We play a role in the behavior of banks and politicians because they also seek to fulfill our wishes so that they can win us over as customers or voters.

Part 3: Consequences: Dangers to Democracy

The public is becoming mistrustful of politicians. Citizens feel treated unfairly when politicians fulfill the banks' wishes with billions in bailouts while ignoring the wishes of citizens. Why does the German government buy up 25 percent of ailing Commerzbank, but not 25 percent of a struggling bakery around the corner or of that other cash-strapped enterprise, the family with three children? One could say that it's because Commerzbank is so large and important to the financial system -- too big to fail -- but that doesn't alleviate our discomfort with an unfair situation.

The power of the executive in Germany, the Chancellery, is increasing at the expense of the legislative, the Bundestag. Chancellor Angela Merkel pushed the first bank bailout package through the country's two houses of parliament, the Bundestag and the Bundesrat, in only five days. The chancellor is pursuing a policy she says is "without an alternative," negotiating bailout packages with the other European Union leaders that the Bundestag is expected to rubber-stamp.

But alternatives are vital to a democracy, as is discussion, correct policy and a parliament that keeps the government in check. But all of this is lost in the constant pursuit of new bailout packages.

Worse than Ever

Yet even as governments gain power relative to national parliaments, they don't have the strength to stabilize the euro. After each meeting in Brussels, the crisis takes a small break. But then it re-emerges, worse than ever before.

One could see the whole thing as a duel between politicians and the financial markets -- but if it is, the politicians aren't looking good.

The economy has all the advantages. Financial companies are not obligated to serve the general good. They are under no pressure to legitimize their actions, they operate in a secretive way, and they pursue a clear goal that they are wildly determined to achieve: high yields.

Politics, by contrast, particularly on the European level, is cumbersome. National leaders must legitimize their actions and reconcile conflicting interests and goals, and they must do so under the watchful eye of the public. They grapple doggedly over the euro, and sometimes things get ugly. But they are almost never successful.

Besides, democracy is based on the word. Without free speech and the open exchange of views and ideas, democracy is impossible. Secrecy is the domain of authoritarian states. But at the moment, European politicians cannot speak openly about one of their most important issues, the euro. All it takes is a few words uttered by a finance minister for the banks to react with the extreme sensitivity. They immediately shift billions in assets, often to the detriment of entire nations. Words have become expensive, and that makes them dangerous.

Seeking Refuge in Lies

As a result, politicians are watching what they say. Pretty much everyone recognizes that it would be fair to involve the banks in the rehabilitation of Greece. But hardly any politicians dare to pursue such a course with any consistency.

The banks and investment firms now play the role once held by the gods. Hardly anyone dares to criticize them, and fear of their wrath guides the behavior of politicians. Many are reluctant to speak frankly, while others seek refuge in lies.

Under such conditions, democracy has lost its dignity. And that is dangerous. The foundation of any dictatorship is the tacit or open threat of violence against citizens. Their fear supports the system. The basis of democracy is respect among citizens. Their approval supports the system. If this approval disappears, democracy crumbles.

Part 4: Solutions: Humility and Dignity

The task now is that of regaining the primacy of politics -- a job for everyone.

The banks have no reason to be boastful. They were saved, and they owe their survival to politicians. If politicians had not acted in 2008, possibly even more banks would have collapsed. Now the financial industry must do its part to rescue endangered nations. A lender is partly responsible for a borrower being too heavily in debt. If a debt haircut becomes necessary, decency demands that the banks relinquish a portion of their claims without complaint. Their role is that of participants, not of supervisors and criminal judges. Humility is required.

Politicians should impose tougher rules on the banks so that the worst excesses of investment banking are no longer possible. Something has already been done, but it isn't enough. The best solution would be an international transaction tax.

Politicians should also liberate themselves from the embrace of the banks. This is only possible if the practice of taking on massive debt finally comes to an end. Only a debt-free nation is a sovereign nation. The debt brake is a good instrument, but it would be even better if it were supplemented by a general awareness that high government debt is inappropriate -- because it undermines democracy and shifts the economic burden to future generations.

As far as the euro is concerned, a two-pronged strategy is needed. European governments should do what it takes to rescue the euro. They should show solidarity with Greece and the other countries that are now struggling. This costs money, and it requires a smarter, better-coordinated and smoother approach than in the past.

How Do We See Ourselves?

At the same time, it's important to make it clear that Europe is more than the euro. If Greece doesn't manage to stay in the euro zone, it will not be the end of the European Union. The project is bigger than money. It's also a political and cultural project, but unfortunately it had an economic bias from the start. It's time for politicians to fix that.

Which brings us to the citizens, ourselves. How do we see ourselves? Is it the image that the banks have: that our biggest concern is achieving high returns on our investments? Is it the image of the Free Democratic Party (FDP): that we want to pay as little tax as possible? Is it the image of the Christian Democratic Union (CDU), the Social Democratic Party (SPD), the Greens and the Left Party: that we are happy with the greatest possible distribution of wealth? All of these images portray the citizen as Homo oeconomicus, as economic creatures first and foremost. Can this be true? Is that who we are? If we were merely driven by money, we could just as well live in an authoritarian state, as long as we were productive, a state that guarantees our prosperity, like Singapore, the United Arab Emirates or China.

Democracy was originally a project of the somewhat affluent who wanted political influence so that they could shape their own lives. That's why they made themselves sovereign. This idea is still seductive today. It removed people from the role of the economic subject that strives for things and is productive, but has no say in the way things are run. It was only when humankind took responsibility for the whole that dignity and sovereignty were obtained. And to remain sovereign -- or to become sovereign again -- we must consider our responsibility for the whole when taking action and making demands.

Ken, I cannot keep my eyes from glazing over while reading all this stuff, so I am not as careful or methodical as you are. So I will defer to your opinion on the crime bill passed. I pretty much stopped caring about it when I learned that lawyers drafting the bill had entirely removed "Bay Street" from the punitive effects of the bill. It might be a better bill, but I am offended that a certain class of people were allowed to play the law in order to stay above the law.

To sum up, Bay Street lawyers cut out the section of the criminal code for fraud affecting the public market as described in Section 380 (2)(To try to understand their motivations for doing so suggests to me that the corrupt are helping to write our laws here in Canada)cheer and best

Larry

below is some of Diane's (former Bay Street analyst, Diane Urquhart) research on the matter:

I testified at hearings into it in a previous parliament and focused on the free pass it gives bay street to continue to cause financial violence to others........Liberal MP Marlene Jennings also pointed it out....................you should have seen the junior government lawyers in attendance try to explain that one.........quite a comical experience

I made a recommended amendment of Bill C-21 to the Senate Standing Committee of Legal and Constitutional Affairs in my communication below. I was asked to appear as expert witness before this Committee tomorrow, but am unable to attend in person. Bill C-21 amends the Criminal Code for a minimum two year jail sentence for fraud over $1 million, more specification of aggravating circumstances, victim impact statements and new provisions on restitution to victims.

The Bay Street Law Firms have once again been successful in Ottawa, this time protecting the public market players committing fraud, by having them effectively exempt from the minimum two year jail sentence. Bill C-21 will pass the Senate within a week due to the Conservative majority there.

I might get the amendment I propose, but the chances are small. Without my recommended amendment, public market fraudsters are still subject to the 14 year maximum sentence, with parole now at one third of their jail sentence rather than one-sixth.

Due to the short notice and other commitments, I am unable to accept the invitation of Shaila Anwar, Committee Clerk of the Senate Standing Committee on Legal and Constitutional Affairs to appear as an expert witness before the Committee on Thursday, March 3, 2011 between 2:30 and 3:30 pm.

I would like to make the following recommendation for amendment of Bill C-21 as noted below.

CURRENT LANGUAGE OF BILL C-21 RECOMMENDED TO BE AMENDED

2. Section 380 of the Criminal Code is amended by adding the following aftersubsection (1):

(1.1) When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1), the court that imposes the sentence shall impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars.

SUGGESTED AMENDMENT OF BILL C-21

2. Section 380 of the Criminal Code is amended by adding the following after subsection (2) (3) When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1) and subsection (2), the court that imposes the sentence shall impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars.

RATIONALE FOR THE RECOMMENDED AMENDMENT

The new two year mandatory minimum sentence for fraud over $1 million, should apply to fraud affecting the public market as described in Section 380 (2).Affecting public market

(2) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, with intent to defraud, affects the public market price of stocks, shares, merchandise or anything that is offered for sale to the public is guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen years.Fraud affecting the public markets is of equal importance to general fraud over $1 million in its impact on individual and institutional investors and on the integrity of Canada's capital markets.

Bill C-21 has the stated intent to "help crack down on white collar crime and increase justice for victims." My recommended amendment is an essential response to the financial crisis caused by alleged fraud in the US subprime mortgage and structured credit markets. This financial crisis has caused high unemployment, impairment of pension funds and retirement savings, and massive government deficits in Canada and throughout the world.

The Senate Standing Committee on Legal and Constitutional Affairs would be remiss in not making the recommended amendment in this submission. Not to make this amendment would create the perception that the Government of Canada wishes to protect public market professional players from exposure to the minimum two year jail sentence applicable to general fraud over $1 million.

These public market frauds include fraudulent manipulation of stock markets, insider trading, falsification of accounting books and the use of reserve and trust accounts to affect the public market price of stocks and bonds, filing of a false prospectus and the use of deceit in the marketing of investments to the investing public. For example, in recent years, there has been alleged systemic fraud in the contracting and marketing of Canadian Non Bank Asset Backed Commercial Paper, in the marketing of income trusts on the basis of deceptive cash yields without disclosure on the return of capital in these cash yields, in banks' omission of disclosure on US subprime mortgage-related securities, and in the market timing abuses skimming mutual fund investors' capital.